City of Grand Forks, North Dakota

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	Mayor and City Council Work Session November 17, 2004 – 5:00 p.m. A101 Council Members Present: Hal Gershman, Doug Christensen, Eliot Glassheim, Gerald Hamerlik, Dorette Kerian, Curt Kreun. Council Members Absent: Bob Brooks, Mayor Brown. Others Present: Rick Duquette, John Packett, Don Shields, Daryl Hovland, Al Grasser, Roxanne Fiala, Todd Feland, Al Morken. Chair Gershman called the meeting to order at 5:00 p.m. and stated that the planned adjournment for today’s meeting will be 6:00 p.m. 1) Greenway. A. Background of Current Storm Sewer Charges. Grasser distributed a three page handout to the members containing the current ordinance for storm sewer rates, a sample calculation sheet, and a map depicting new areas that may be added coverage areas for storm sewer rates. He stated that the ordinance defines classes of storm sewer users: residential, commercial, commercial with a holding pond, undeveloped areas (such as parks), and schools. He continued with page two of the handout which shows sample calculations of storm sewer charge for different classes. He explained that annually the Council establishes what the run-off rate will be and that rate is then applied to the run-off units for each property in the City that has run-off into the City sewer system. The run-off unit is calculated by taking the square footage of the lot multiplied by the established run-off rate for the class of property in which the lot falls. He added that there is an established minimum charge and many lots in the City pay this, as their calculation actually comes out to be lower. The group inquired as to what an example of a business with a 300,000 square foot lot would be. Grasser stated that would be similar to a Rydell Chevrolet, implement dealer, or the area directly around REA. Grasser continued that in code there was a separate rate established for undeveloped land, primarily park land, because due to its nature it tends to hold the run-off longer and therefore is less of an instant hit on the sewer system than developed lots with large amounts of concrete. Grasser explained that a separate rate was approved by council in the past for schools, as they typically used to have large areas of green space which was used for playground area. He added that this is changing however, as the schools have begun to develop more of their land into building additions and parking, and have begun to rely on the park district land next to them for recreational space. Grasser stated that there is also a separate class for commercial development with a holding pond that eases the amount of runoff that goes into the sewer system. Examples of this would be WalMart, Target and Columbia Mall. Grasser stated that one item to consider may be the elimination of this rate, since the runoff still enters the system, and while it goes in slower, the same type of regular maintenance and replacement is necessary since the overall volume remains the same. Grasser drew the groups attention to section 3 of the ordinance which deals with exceptions for paying the storm sewer charge. Christensen added that they have already discussed eliminating item 3D and asked how many properties would be affected. Grasser directed the group to the Map provided in the handout packet. He stated that the new residential lots that would be receiving a charge are shaded in tan and would add about $600 monthly revenue, Altru complex is shaded in blue for $800 monthly, park land is shaded in red for $400 monthly, and UND land is shaded in green for approximately $4,000 monthly if that land were charged under the commercial rate. Grasser stated that would lead to a total increase in storm sewer revenue of approximately $5,800 monthly, translating to just under $70,000 annually. He added that the one area for discussion may be as to what rate to use for the university property, as in the past we have sometimes charged them at the school rate rather than the commercial. If we made that designation in this case, their monthly charge would drop to $3,800. Christensen stated that some view UND, particularly the lots that are developed in a commercial manner, as more like a business, as they will just pass on the increased cost to the consumer, whereas residential properties have no way to pass on their charges. Gershman added that perhaps we would need to look at different areas of UND in different classes so that their commercial area is treated the same as other commercial property. Grasser added that the charge is based on the how the water billing accounts are set up and he would have to do some research into our ability in this area, and that some of the lesser developed parcels may not yet have a billing associated. The group asked whether the Alerus is charged for storm sewer. Grasser stated that he would need to verify, but believes that they are not charged, as they are city owned property so are exempted in 3A of the ordinance. Kreun pointed out that maybe we need to make a change and start charging ourselves. Duquette pointed out that just moves dollars around from one fund to another and will not generate new revenue. Kreun gave an example of how a similar issue happened when the state of Minnesota decided to start charging schools sales tax. He added that this puts you in the same place for budgeting that other businesses and governmental entities are and sometimes leads to more thought of the effect that these charges can have on others. Hamerlik inquired as to why there is a minimum charge, as that appears to make the impact heavier on smaller users of the system and that by charging everyone based on actual calculation we could especially ease the burden on some of the smaller residential customers. Grasser stated that one of the reasons a minimum charge was set was due to the fixed cost of maintaining the system, the basic revenue needed to cover expenses of operation, and especially to address the issues in townhome type developments where each parcel is relatively small, but shares and common area and should share as any other property in the costs for the system. Grasser added that one thing to consider in any changes in this area would also be that the existing rate structure was set based on the use of minimums and research would need to be done to see if eliminating or lowering the minimum charge would necessitate an adjustment in the other rates that are charged. Feland added that another item to consider is that the only debt service in that fund is the SE Drainway and there is a cash balance that could be spent down in order to gradually implement an increase in the other rates. Grasser also brought up that the group may want to take a look at the policy of charging a separate rate for properties with ponds. Glassheim inquired as to why this fund was the only one being discussed. The group discussed the previous connection that had been established with the special assessment for the construction of the flood protection project being assessed under the storm water fund. The group concurred that the ground work connection and arguments for handling this as a part of storm sewer were laid then and continuing to cover the costs of maintenance for the both the flood protection project and the resulting greenway space would be supportable. The group concurred that a separate line item on the utility bill should be created that would list the charge as a flood protection and/or greenway maintenance charge, rather than just increasing the cost of the current storm sewer charge. Hamerlik expressed a concern that there may still have some that would not find a connection to the storm water fund so feel this is not a fair way to allocate the cost. Christensen replied that some could say that with the public school system and the taxes that they levy for individuals without children attending. Feland added that we cover other items for general maintenance under storm sewer fund as well, such as flood stations, levies, and as the greenway is a natural by product of the flood protection project it fits with the precedent that we have set in funding for the other items. He stated that there is currently $1.4 million in the storm sewer cash and that a recommended cash holding is between $400,000 and $500,000 and that we therefore have available some funds that could be spent down so that any increase in rates in this fund could be implemented on a gradual basis over several years. Grasser added that one of our main storm sewer problems in some areas was overland flooding and we have now controlled that through the drainways that are a part of the project so that also adds to our use of storm sewer fund for maintenance of these items. Christensen stated that since we know we have the cost, and there is a desire to not have a mill increase to cover the cost, then we should look at proceeding with a blending in of the new rate, while using the cash balance to ease the rate in. He expressed that the City also needs to make sure that it educates the public on what the charge is for, as there are some who feel that their special assessment is for the maintenance of the flood project and we need to make sure that the word gets out that the special assessment only dealt with the construction of the project and that now this charge is how we maintain it. He feels that we have already faced a similar argument when the special assessments were done and have enough information to educate the public on the nature of these costs as we did then. Gershman agreed that we need to start the information process to the public in advance so that by the time the charges begin to show up on the utility bill they are aware of what they will be funding. Kerian asked if the gradual reduction of the cash balance in the fund was already included in the rate study we have in place. Feland stated that the $800,000 costs the group is looking at will be an approximate cost once the project is totally completed, the first few years will be less than that as we gradually complete the project and that combined with the cash spend down and addition of the new property that is not currently being charged a storm sewer charge will all work together to reduce the final cost that needs to be covered by a charge on the utility bill. Christensen stated that most in the public are not thinking about this maintenance cost now and that the Council needs to move forward, starting with making a change in the ordinance to allow the storm sewer charge to be applied to all property, then as the flood protection and greenway projects move closer to completion, we can start adding the charge to the utility in 2006 with gradual increases that will allow it to fully fund the maintenance charge by 2008 when the project will be done. He stated that he feels this gives the foundation to the 2009 City Council the opportunity to move forward with funding for these items. The group discussed that the largest impact would be on the university land and that if the cost were passed on it would amount to thirty-five cents per student, which is not a material amount. Glassheim inquired as to if the formula could be modified so that residential lots would feel less of an impact than the larger commercial users or if maybe the flow rate or minimum rates could be adjusted as we move forward. Hamerlik stated that he would be in favor of looking at a variety of combinations of these. Feland stated that the formula does have built into it a function that will change the run-off rate based on the cost that needs to be covered in the utility. Grasser explained that one thing that may change drastically between years is the amount of maintenance required. He continued that the estimates that were given are averages, based on a calculation of several years costs. For a year with little or no flood cleanup required the cost could be substantially less, versus a year with a 50 foot flood and much rain fall would require substantial maintenance costs in returfing, etc. He added that the group will need to make decisions on the level of maintenance that is planned for on an annual basis and adjust the charge to cover. Kreun stated that the formula that we decide to use should probably be based much like the one that was developed for water where we are able to control where the cost goes once we know what we need. Christensen added that we also have the ability to do short-term borrowing of funds from one fund to another as an option for covering large unanticipated losses. Kerian stated that she was in favor of using the utility charge rather than a tax, as there is more flexibility on the Council side for adjustment, either up or down as needed, than there would be with some type of tax. The group instructed staff to begin work on revising the ordinance as follows: eliminate 1C; 3A, 3C, and 3D. In the area of 3B, private or public cemeteries, discussion was held on whether they should also receive some type of charge, while maybe not a full share. It was discussed that for the flood protection project special assessment they received a 50% share of what a normal commercial assessment would have been. The group discussed the classification for the university properties. Grasser stated that he would propose that the school proper be charged at the same rate as the public schools, while the commercially developed portion of their land be charged at the commercial rate. Hamerlik expressed a concern over whether the schools should continue to receive a lesser rate given that most of their land is developed more in line with commercial developments than undeveloped land. The group proposed looking at increasing the school rate to .0025, the same as residential. Staff will begin work and bring a revised ordinance back to the group for the next meeting. Respectfully submitted, Sherie Lundmark Admin Spec Sr.